MR. GREGORY: What does the president do now? How will he frame his agenda during next week's State of the Union address? Our exclusive guest morning, senior White House adviser Valerie Jarrett.

Then the Republicans. The Massachusetts victory gives the minority party a shot in the arm, but does the GOP stand for something more than opposition to the Obama agenda? We'll ask Senate Minority Leader Mitch McConnell of Kentucky.

Finally, in our MEET THE PRESS MINUTE, January 1976, another time of economic turmoil. Democratic presidential candidate Senator Lloyd Bentsen offers some practical advice to then President Gerald Ford on his upcoming State of the Union address.

(Videotape, January 18, 1976)

SEN. LLOYD BENTSEN (D-TX): We should be creating opportunity. What people are really looking for in this country is a return of self-confidence.

MR. GREGORY: Thank you. There is some news developing overnight that I wanted to ask you about.

MS. JARRETT: Sure.

MR. GREGORY: Osama bin Laden has reportedly cut another audiotape claiming responsibility for the Christmas Day attempted bombing. Is that his voice, and is it striking that he appears to be back in charge of calling the shots on running operations for al-Qaeda?

MS. JARRETT: We have no independent confirmation that that is, in fact, his voice. But let's look at--the fact of the matter is, is that he's a murderer, he has attacked Americans. In fact, he's killed more Muslims than any other group in the region. And so the president is committed to going after al-Qaeda and all of their affiliates and bringing them to justice.

MR. GREGORY: Is he in direct command and control of al-Qaeda? Is that the view of the intelligence community?

MS. JARRETT: We have, we have, we have no independent verification of that whatsoever, but we are going to go after al-Qaeda and its affiliates and certainly him for the atrocities of the past.

MR. GREGORY: The other big news story this morning is the question about whether Fed Chairman Ben Bernanke is going to be confirmed for another term. Where is the level of confidence right now within the White House that he will get the requisite votes?

MS. JARRETT: Oh, it's very high. President Obama checked in with the leadership over the weekend, and he heard from Senator Reid that there is a lot of support for Ben Bernanke. We are confident that the chairman will be confirmed.

MR. GREGORY: So much news this week out of Massachusetts. The stunning victory of Scott Brown, the Republican, in that special election. And the obvious question that came out of that is what's next for healthcare reform? The president was out in Ohio on Friday, he was talking about health care, talking about jobs, but he said he's going to keep fighting for health care. So what specifically will he fight for?

MS. JARRETT: He's going to fight for what he's always been fighting for, David. Look, the fact of the matter is, you're right, it was a stunning victory. But the people in Massachusetts already have healthcare reform. In fact, Senator Brown voted for the healthcare reform that Massachusetts has. He said he wouldn't vote to repeal it. And in fact, we're very confident that it's similar to the bills that are currently being debated here.

MS. JARRETT: He's going to--of course, he's going to fight for the American people. David, listen, nothing changed about the fact that costs are escalating too high, that out-of-pocket expenses for health care are growing, that premiums have doubled over the last 10 years, that people who do not have insurance need insurance, the people who do have insurance are losing it because of pre-existing conditions, that the deficit is looming out of control in large part because of health care and that small businesses are having to choose between laying off people and paying for health care.

MR. GREGORY: I understand the arguments for health care.

MS. JARRETT: That--none of that changed as a result of that election.

MR. GREGORY: But what specifically in the bill will he continue to fight for? Does everything have to be in there in order for it to be considered reform by this president?

MS. JARRETT: What he's doing and what happened over the course of the weekend is there've been a series of phone calls and conversations to try to see what, what the climate is, what's the art of the possible. But what the president is always going to do is try to push hard for the American people. He's not going to give up on that because of one election in Massachusetts. He's going to continue to work hard. We don't know what's going to happen. But what we do know is that we have a president committed to delivering for the American people.

MR. GREGORY: So he'll fight for the package as-is?

MS. JARRETT: He's going to fight for trying to get as absolutely as much as he can to reduce the cost of health care, to provide insurance, provide a security and safety for those folks who have insurance now, all of the core principles that we set forth at the very beginning of the process; core principles, I might add, that were included in both the bill that was passed by the Senate and the bill that was passed by the House.

MR. GREGORY: The, the...

MS. JARRETT: So we'll see where we go, David.

MR. GREGORY: Republicans have said he has not been bipartisan in this process. Is he now prepared to sit down with Republican leaders to figure out what, precisely, could be passed?

MS. JARRETT: David, he has been prepared since day one--in fact, he has sat down with the leadership the members of--on the Republican Party, both the House and the Senate. And in fact, bills in both the House and the Senate contain provisions that were suggested by the Republican Party. So nothing's changed about the president's approach. I think the question to be asked and what we learned from the Massachusetts victory is that people are sick and tired of Washington not delivering for them. And so the question is really, will the Republican Party become--be willing to come and work with us? A silver lining is Senator Brown said yes, he's looking forward to coming to Washington and working with the Democrats, and we're hoping that that provides new leadership within the party.

MR. GREGORY: You raise Massachusetts and you raise this question of priorities. This is what our recent polling found in terms of what are the priorities of the American people? And on top of that list is not health care; in fact, it's job creation. That was first on the list at 38 percent. There's health care at 12 percent, fourth on the list. Why keep pushing for health care in the middle of a recession when the American people don't seem to put that at the top of the list?

MS. JARRETT: Well, you're assuming that it's a choice between either or. The president, from the day he was elected, has made job creation and the economy a first priority. Let's, let's just remember where we were a year ago, David. We were losing 700,000 jobs a month. We were in the middle of the worst economic meltdown in our nation's history. Our financial system was on the brink of collapse. We had the largest federal deficit in our nation's history. And what's happened over the last 12 months? We're no longer losing 700,000 jobs a month. We've cut that number by--to less than 10 percent. We've turned the economy around. We are moving forward in the right direction.

MR. GREGORY: You can't say--I'm sorry.

MS. JARRETT: However, however, David...

MR. GREGORY: You can't say you've turned the economy around when there are four million jobs that have been lost on the president's watch.

MS. JARRETT: You didn't let...

MR. GREGORY: When the debt is higher and the stimulus did not produce the jobs that the administration said it would.

MS. JARRETT: Well, I actually disagree with everything you just said. Let's, let's take a look. We have pulled it back from the brink of disaster. That was our first and primary goal. The president took some bold steps that were not necessarily popular, but that did stabilize the financial system. This is a long haul, David, and we are not satisfied--having any American who wants to work unemployed is something that the parent--the president takes to heart each and every day. This isn't something that's going to be repaired in one year. We're going to have to push forward. But that doesn't mean we give up and that doesn't mean that jobs haven't been a top priority from day one.

MR. GREGORY: You talk about the economy. What specifically is the president prepared to do this year to create jobs?

MS. JARRETT: Well, as you mentioned, he's going to be giving his State of the Union address this week, on Wednesday, and he'll have an opportunity that he's looking forward to speak directly to the American people, something you know that he always enjoys doing. And he'll be able to set forth his priorities, and they will be focusing on the middle class. Our middle class is struggling out there. They're frustrated, they're angry, they're working hard to try to make ends meet. They're having to make terrible choices between paying their rent and putting food on the table and paying for their health care and sending their kids to college. These are the same principles that the president advocated in the course of the campaign. They're the same principles that he's carried with him throughout the course of this year. And we've taken several bold steps over the course of the year. The recovery act saved thousands and thousands of jobs. There are school teachers and firemen and, and teachers all across our country, policemen, who have jobs today because of that recovery act. We are investing in infrastructure. We're investing in public education so that our kids can compete going forth into the next generation. We're investing in renewable energy to reduce our dependence on foreign oil. These are all connected to the economy. And what we have to keep in mind, David, is that, is that we need to have a sustainable, healthy, long-term economy.

MR. GREGORY: Here was the president on Friday in Ohio, and his, his tone was different. He sounded more like a campaigner than he did as an incumbent president. Let's watch a piece of that.

(Videotape, January 22, 2010)

PRES. OBAMA: I did not run for president to turn away from these challenges. I didn't run to kick these challenges down the road. I ran for president to confront them once and for all.

(End videotape)

MR. GREGORY: Does this mark a new approach to how he's going to communicate with the American people during the State of the Union and beyond?

MS. JARRETT: You know, I would ask you to go back and, and look at the speech that the president gave in September of 2007 on the floor of Nasdaq, where he's--he called for accountability. He said that there are excesses that are running out of control. He called for checks and balances that would stop the excessive risk taking that was going on. That same tone is what he has had for as long as I have known him. So no, I don't see any difference. I do see...

MR. GREGORY: But he, he acknowledged...

MS. JARRETT: ...a heightened frustration.

MR. GREGORY: But he acknowledged a, a failure of communications of sort to communicate to the concerns of the American people. He said this this past week.

MS. JARRETT: What he--what I saw him express on Friday was the growing frustration with Washington and the fact that what you continue to see here is an entrenched status quo where the special interest groups and the lobbyists dominate the day, and where people have lost sight of the American people that they are here to serve. And so what you saw was some frustration and some anger because of what's happened over the course of the last year. We are working so hard to put our country back on the right track, and what we want is partners in the Republican Party. And we're hoping that with Senator Brown, we have that.

MR. GREGORY: Evan Bayh, the centrist Democrat from Indiana, as you know, is among those that we've sought out in the course of this program today to get some outside voices to join the discussion. This was the wake-up call that he described from the Massachusetts special election.

(Videotape)

SEN. EVAN BAYH (D-IN): If you look at the independent voters who have bailed out on the Democratic Party in Virginia and New Jersey and now Massachusetts, they care about the economy, they think the healthcare bill was--went too far in some ways, and they care about spending and deficits. That's one thing we can correct, starting with the president's budget and starting with the State of the Union address this week.

(End videotape)

MR. GREGORY: Add to that that the president's standing among independent voters is down 11 points from Election Day 2008. The president said this week that Americans should be frustrated and angry. Should they be frustrated and angry at him?

MS. JARRETT: Look, he's the president of the United States. Ultimately, he accepts responsibility and he knows that he has to move our country in a new direction. He's said from the beginning that it's going to be tough and it's going to be challenging, and he isn't, he isn't shying away from that challenge. He said he's going to continue to fight, and that's what he's going to do. Every single morning he wakes up recommitted to fighting on behalf of our country. Every night before he goes to bed, he reads letters from 10 people from all around the country, sometimes children, asking for help. The people of America are so resilient. They love this country.

MR. GREGORY: But do they have a...

MS. JARRETT: They're willing to work hard.

MR. GREGORY: My question was, do they have a question to reason to be frustrated at him?

MS. JARRETT: They have a reason to be frustrated with everybody, because we have not delivered yet. We're now in Washington, and so we have to change the culture here. That's not something that's easy, it's not something that's going to happen overnight. But certainly, they have ever reason to be frustrated. But there was also a Washington Post poll that came out this week that said, look, if you actually show people what's in health care, for example, they're very supportive of it. And part of the problem is, is that there's been such a distortion and such a rhetoric and such misinformation that clutters the media, that it is hard to get our message through. Well, do we have to do a better job with that? Absolutely.

MR. GREGORY: There--David Plouffe, who was a campaign manager for the campaign of 2008, is now back in the fold as an adviser.

MR. GREGORY: A lot being made of that. Was the president upset that, in effect, he was too surprised by what happened in Massachusetts? Did his political team let him down?

MS. JARRETT: You know, that's the game that Washington likes to always play. David Plouffe has been a regular adviser to the president throughout the course of the year. He ran a magnificent campaign. He's been off writing a book and on a book tour, and now that that's running to a close the president asked him to come back. The president has full support of his team, and that team will work closely with David Plouffe. He's value added, and we're delighted to have him back.

MR. GREGORY: You're not hit, hitting the reset button here?

MS. JARRETT: No, we're not hitting the reset button at all. David is, David is terrific. We're going to engage him. And I think Washington's always looking to have somebody out and somebody in. That's not the way this president leads. He's always looking for new talent. He looks for new talent in the Republican Party.

MR. GREGORY: The president came into office promising change. In his first year, what has he changed?

MS. JARRETT: Well, I think what we've seen is a, a dramatic difference in terms of how the United States is perceived around the world. I think that the president has been able to travel across the world and to establish relationships with world leaders that lie--lay a foundation for keeping America safe and, and making us a partner around the world so that we can tackle challenges collectively with other world leaders. I think that he has pulled back the economy from the brink of disaster. That's an enormous amount of change when you consider where we were a year ago, right on the economic brink. And he's adding discipline in government to try to get control of our--over our fiscal house. So I think we've seen enormous change.

MR. GREGORY: Is there one Republican who will support any Democratic healthcare initiative?

SEN. McCONNELL: Well, what we really need to do is start over. I mean, I--the message in Massachusetts was absolutely clear. The exit polls that I looked at said 48 percent of the people in Massachusetts said they voted for the new senator over health care. Only 5 percent mentioned any other issue. The American people had a victory in Massachusetts, and they were sending us the message "stop and start over."

The first thing we ought to do is go back to what the president said in 2007, let's have the C-SPAN cameras in the room. Number two, let's concentrate on cost, which is what the American people would like us to address. And a good place to start there is with junk lawsuits against doctors and hospitals, which were not even a part of the proposal. Absolutely, it's time to start over and go step-by-step to address the issue that the American people thought we...

MR. GREGORY: So let me just be clear. There is not one Republican that would vote for any Democratic healthcare reform initiative that's out there now?

SEN. McCONNELL: Well, this comprehensive bill? Of course not. You know, the American people are overwhelmingly opposed to it.

MR. GREGORY: So it sounds like...

SEN. McCONNELL: What we need to do...

MR. GREGORY: ...the party of no charge is well deserved.

SEN. McCONNELL: No, no. What I said we need to do--I just said it. We need to, we need to stop and start over and go step-by-step...

MR. GREGORY: What did they say yes to in the course of that negotiation?

SEN. McCONNELL: From a policy, from a policy point of view, what this ended up being was a $2.5 trillion bill that cut Medicare by half a trillion dollars, raised taxes by half a trillion dollars, would drive up insurance premiums for most Americans. That's not reform. And that didn't have much appeal to Republican senators.

MR. GREGORY: So tick off the top three points of the Republican plan for, for healthcare reform.

SEN. McCONNELL: First, you do have to do it on a bipartisan basis. You put the C-SPAN cameras in the room, as the president said. You start with junk lawsuits against doctors and hospitals, interstate competition among insurance companies, and many of my members would be looking--would be willing to look at equalizing the tax code. Right no w if you're a corporation and you provide insurance for your employees, you get to deduct it on your corporate tax return. But if you're an individual on the individual market, you don't. Step-by-step to work on the cost problem. That's what Republicans are willing to do.

MR. GREGORY: Is universal coverage a priority?

SEN. McCONNELL: Expanding coverage is a good idea. But even under this $2.5 trillion monstrosity, they still didn't end up covering everybody. That is easier said than done. But if you equalize the tax code, you make it more possible for more people who are currently uninsured to, to purchase insurance. Right now they have no tax incentive to do it. And a lot of young people look at the situation, say, "Gee, I'm going to live forever, why should I buy it?"

MR. GREGORY: Is healthcare reform dead?

SEN. McCONNELL: This particular bill deserves to be stopped. What we need to do is start over and get it right.

MR. GREGORY: But my question was, you're looking at the votes, you're looking at the landscape; is healthcare reform dead?

SEN. McCONNELL: Well, the Democrats are in the majority. They have the White House, they have the House, they have the Senate. They have to decide whether they want to listen to the voices of the American people. All the surveys all across the country--and even in the most liberal state in America, arguably, Massachusetts--the people are telling us, "Please don't pass this bill." Now, if they get past this arrogant phase that they've been stuck in for about a year that, "We know best. We don't want to listen to public opinion here, we want to `make history,'" if they can work their way past that and concentrate on the real problem, which is the cost, we're willing to look at it. But I think we need to be concentrating on the economy.

Look, we passed a stimulus bill. The, the goal there was to keep unemployment at 8 percent. It's now 10 percent, in my state 10.6 percent. Let's concentrate on what the American--you showed the survey earlier in your program of what people would like for us to be working on, and that's job creation.

MR. GREGORY: I just--before we get to, to jobs, I just want to ask you quickly, it sounds like you're saying there still may be some, some reason for hope here, that the president can cobble together and agreement to actually get healthcare reform through. Is that your view?

SEN. McCONNELL: What I, what I hope is that this current bill that we've had on the table is finished, over.

MR. GREGORY: Right. But you're not pronouncing it finished.

SEN. McCONNELL: Well, the majority ought to make that--reach that decision. It ought to be over. The American people are telling us, "Please stop trying to pass this."

MR. GREGORY: You talk about jobs. Before we get to that, a key issue coming up, as I mentioned, is Ben Bernanke's renomination. Will you vote for him as head of the Fed?

SEN. McCONNELL: Well, he's going to have bipartisan support in the Senate, and I would anticipate he'd be confirmed.

MR. GREGORY: Will you vote for him?

SEN. McCONNELL: He's going to have bipartisan support...

MR. GREGORY: But you won't say how you'll vote?

SEN. McCONNELL: ...in the Senate. I'll let you know in the next day or so.

SEN. McCONNELL: Some of my members do, but I think he's going to be confirmed.

MR. GREGORY: All right. Let me ask you about jobs. What is the GOP plan to create jobs?

SEN. McCONNELL: Well, the first thing you do is you stop this job killing healthcare bill, and you don't pass the energy tax that passed the House earlier this year. Their prescription for new jobs is obviously higher taxes. Don't do that. You've got tax relief that was passed a number of years ago expiring next year. Don't raise taxes in the middle of a recession. Look, if I'm running a small business, David, and I'm trying to figure out what to do next year, I'd like to expand employment, but I'm looking at the potential for healthcare taxes, I'm looking at the potential of income taxes going up, dividend taxes going up, capital gains taxes going up. The cost of adding employees is bothering me. And then I see the administration rattling the markets on top of it. You know, if you sum up the first year, what this administration has done best is rattle the markets, advocate tax increases and run up deficits. That's not a very comforting message to business people looking at trying to expand employment.

MR. GREGORY: The president's also looking at the long-term fiscal health of the United States. He wants to put together a bipartisan commission that will look at the possibility of either tax increases or budget cuts or both, but long-term budget health. Will you support that?

SEN. McCONNELL: I think a spending commission is a good idea. I've been advocating it all year. We're going to have votes on several different forms of that in the, in this very next week in the Senate. Spending is the problem. I do worry that if we construct this commission in the wrong way, it will be kind of an indirect way to raise taxes. I've already indicated what I've said earlier today, that raising taxes in the middle of a recession's not a good idea. We don't want this to end up doing that. What we need is a spending reduction commission. Get spending down.

MR. GREGORY: You said that the Republicans would always choose bipartisan solutions when they were available. And yet the one statement from a Republican this year, Senator DeMint, that health care would be Obama's Waterloo, to many people signals the approach that Republicans have taken, which is oppose the president at all costs, just stand in the way of his agenda. Is that constructive?

SEN. McCONNELL: Look, we have a hundred members of the Senate. All of them have different points of view about every issue. My view is that this is not about the president, this is about the country. And if you look at the first year of this administration, we haven't made much progress. You know, we passed a deficit--a budget that doubles the national debt in five years and triples it in 10, tried to pass energy taxes, tried to pass healthcare taxes. I--what I hope we're going to hear from the president next Wednesday night is an indication that he'd like to go in a, in a different direction. And as I've said all year, if he wants to meet us in the middle of the political spectrum, we'll be there to help him.

MR. GREGORY: Well, this is how you're characterizing President Obama's first year. How would you characterize the performance of Republicans?

SEN. McCONNELL: What we did is--this year is try to operate on principle. The president made a decision to go hard left. That's why he doesn't have many of my members. If he chooses to govern in the middle, I think he'll have much broader cooperation from Republicans.

MR. GREGORY: We talked about Scott Brown's surprising victory in Massachusetts. The celebration went forth from Massachusetts throughout the political world. It was an indication that perhaps a Time magazine cover from earlier in the year might have been wrong. This was Time magazine in May. It had the GOP as an endangered species. Maybe the party's gotten a big shot in the arm here. But look at this in terms of confidence in Republican leadership, from our recent poll. To make the right decisions, confidence in congressional Republicans, 75 percent, three quarters say they have some or none. Are the American people ready to return to Republican leadership?

SEN. McCONNELL: I think the most significant question is what's call a party generic ballot question. If the election were held today, would you vote for the Democrat or the Republican candidate for Congress? On the day the president was sworn in, my party was down 15. A couple of weeks ago we were up 4. I, I think the American people are never permanently in the camp of either party, never permanent. They're looking at performance. They want to know what we're going to do for them. And I think the reason that you had the victories in Virginia and New Jersey and most improbably in Massachusetts, of all places, was the American people are saying, "We want to go in a different direction." I hope the president will get the message and change direction, and we'll begin to see that next Wednesday night.

MR. GREGORY: Does the Republican Party, in this election year, need what the Republicans had in 1994, which is a contract with America, as they did in '94, to get 300 Republicans to sign up for no new taxes and a balanced budget? Do you see that as being a necessity this year?

SEN. McCONNELL: Yeah, I think we will have a plan. We've had a plan, an alternate plan, on everything this year, and I think we'll have an alternate plan for the voters in, in November.

MR. GREGORY: So you will have a contract with America for 2010?

SEN. McCONNELL: Well, I don't know what it, what it'll be called. And of course, every race is different. You know, running in New England is different from running in the West. Senate races are typically, to some extent, custom crafted to the, to the people that, that will be voting.

MR. GREGORY: The Supreme Court decision this week to allow corporations and unions to spend unlimited amounts on campaigns is getting a lot of criticism. Who do you think it benefits most, Republicans or Democrats?

SEN. McCONNELL: Well, I don't know who it benefits, but it's an important victory for the First Amendment. Right now if you're General Electric and you own NBC, you can say anything you want to about any candidate right up to the day of the election. But if you're a corporation or a union that doesn't own a media outlet, you haven't been able to. So you've had this big gap in the First Amendment applying one standard to media-owned corporations, another standard to unions and corporations that don't own media outlets. Now the Supreme Court has said the First Amendment is for everyone. I think that's a step in the right direction.

MR. GREGORY: Final point here. The president's about to give his State of the Union address. You know, a lot people look at Washington and they say Washington doesn't work. So beyond the partisanship, how about some constructive engagement? What would you advise the president to do to help Washington work better in his second year?

SEN. McCONNELL: Look, it's about policy, not personality. I like the president. I like him a lot. I think he's a terrific person. We've had a number of meetings. I enjoy being around him. I like what he's doing in Afghanistan. It's about policy, David. And if the president wants to govern in the middle, there'll be Republicans there to meet him.

MR. GREGORY: What are Republicans prepared to do to be more constructive this year?

SEN. McCONNELL: We have to see what he--you know, he's the president. He has a right to govern. Governing is hard work, as he has discovered. But he, he makes the initiatives and we react to them. And if he will move to the political center, I think he'll find a lot more Republican support than he's had in the first year.

MR. GREGORY: But he has to move before Republicans will do anything?

SEN. McCONNELL: He's the president of the United States. We're waiting for him to make his initiatives. He was chosen to make the tough decisions. He chose to go hard left the first year. We'll see, beginning Wednesday night, where he plans to be the second year.

MR. GREGORY: Given the, the state of the political mood right now, are there incumbent Republicans who need to worry this election year?

SEN. McCONNELL: I think that--as I said earlier, I don't think the voters are ever permanently in the camp of either party, and we've seen that on full display over the last couple of years. Our candidates will be arguing for lower taxes, lower deficits and a vibrant economy, and we'll see what the American people decide in November. If the election were held today, obviously, we'd have a very good election.

MR. GREGORY: Leader McConnell, thank you very much.

SEN. McCONNELL: Thank you.

MR. GREGORY: And coming up next, our roundtable sorts through it all. Weighing in on the 2010 political landscape and the Obama agenda: E.J. Dionne, Katty Kay, Peggy Noonan and Chuck Todd. Plus, our MEET THE PRESS MINUTE from 1976: Advice from a senator to a president as he prepares to deliver his State of the Union address. Only here on MEET THE PRESS.

(Announcements)

MR. GREGORY: Our roundtable weighs in on the political landscape and the Obama agenda after this brief commercial break.

MR. GREGORY: And we're back, joined now by E.J. Dionne of The Washington Post, Peggy Noonan of The Wall Street Journal, Chuck Todd of NBC News and Katty Kay of BBC World News America.

Welcome to all of you. Wow, is this a week to discuss or what? There's so much to get to. Let's go with Massachusetts to begin with, the question of where are we then? Where are we now? Here were the results comparing Massachusetts to where Obama was in 2008. Twenty-six points he won Massachusetts by. You fast-forward to the 2010 race, Scott Brown wins by five, that's a 31-point shift. Look at some of the other key races we've looked at. Virginia, that's where Obama won by seven in '08. It's the Republican, McDonnell, wins by 18, a 25-point shift. And New Jersey, you've got a 19-point shift, another Republican winning in an election this year compared to--this was the governor's race, of course--compared to the presidential race of 2008.

Peggy Noonan, what happened?

MS. PEGGY NOONAN: I think America never stops being a dynamic country. It's always exciting here. Look, I, I think the president had difficulties in his first year. Those shifts tell it. I think the big message is the 2008 election settled nothing. America is still in play. We've got Republicans and conservatives being resurgent. Bigger than that, I think the president is losing or has lost the independent vote and the center in the United States. That's a bad thing to happen to a presidency in a first year.

MR. GREGORY: E.J.:

MR. E.J. DIONNE: Well, first of all, let's not overlook political incompetence here. Martha Coakley was ahead by 31 points, the Democrat. She ended up earning 800--she got 850,000 fewer votes than Barack Obama did in 2008. The Democrats should've seen this coming and they didn't. That's why I think they're bringing back David Plouffe.

In a larger sense, if you look at President Obama's problem and the Democrats' problem, they're suffering at both ends. They are losing energy from their own supporters, from progressives, and they are losing in the middle. The independent voters voted against them in Virginia and in New Jersey, and now in Massachusetts. And I think that double problem belies the normal talk you hear in Washington, "Well, now we move to the center or we move to the right." That's a really stale debate and it doesn't begin to deal with the problems Democrats have, because they've got to get energy on their side again and they've got to start winning the middle. That's why I think they are trying--Obama, in these very forceful speeches where he's using the word "fight" about 100 times a day...

MR. GREGORY: Right.

MR. DIONNE: ...is trying to say, "Look, we get it. We are fighting against Wall Street." They look like Wall Street liberals. Now, can you imagine a worse combination than being a Wall Street liberal?

MR. GREGORY: Right.

MR. DIONNE: And they're trying to say, "We're going to fight for you against them."

MR. GREGORY: Katty Kay, here, here's the cover of Newsweek magazine that'll hit the newsstands, and you see Barack Obama on, on the cover. And the title there is "The Inspiration Gap." And it does lead to this question; the president acknowledged that he had somehow failed in his ability to communicate to the American people, to somehow connect to their concerns. Peggy, you wrote this, this column about whether he was really connected. The obvious question is, how could that happen? How could the great communicator of our time have failed in that fundamental goal?

MS. KATTY KAY: Yeah, and I think that's the question that the White House is asking right now. That's part of whatever--if there is going to be a reset, it's going to be a reset around the issue of communication. That there were very valid reasons for the stimulus plan, for the bank bailout, for healthcare reform in American, but the president failed to present those reasons in terms that ordinary American families could connect with. There was almost an arrogance in the White House that "we are doing the right thing for the American people, but we don't have to actually explain it to the American people."

MR. GREGORY: Right.

MS. KAY: "We don't have to actually go to the people and say, `We need to do this, and this is why.' This is why there is a real cost if we don't enact healthcare reform, and there is a real benefit if we do enact it." And I think that message didn't get across. And maybe Obama came out of the election thinking, "I have this mandate to govern this country, and because of my story and because of who I am and because of that enthusiasm and inspiration and that hope around my election, I don't actually need to go about explaining things," and that was a big error.

MR. GREGORY: Yeah. Chuck, let me bring you into this, but I want to set your comments up with this. Politico wrote a piece this week called "What Went Wrong," and this is part of it: "Obama and his team ... believed that the historical cycle had turned, that voters had not only rejected George W. Bush's brash conservatism but also moved beyond Bill Clinton's tepid and defensive-minded progressivism. ... Obama believed that early success would be self-reinforcing, building a powerful momentum for bold government action. This belief was the essence of the White House's theory of the `big bang'--that success in passing a big stimulus package would lead to success in passing health care, which in turn would clear the way for major cap-and-trade environmental legislation and `re-regulation' of the financial services sector--all in the first year."

MR. CHUCK TODD: Well, this was about overlearning the lesson of Clinton, right, which is to don't sort of dillydally in one issue, right, immediately try to do a whole bunch of things.

But, you know, I want to get back to the, the--something about this idea of the message problem that this White House has, because it's odd to say they have a message problem when they are out there all the time trying to sell something.

MS. KAY: Hm.

MR. TODD: Now, part of it is they're selling, obviously, a lot of things at one time. They got bogged down in the healthcare debate and that's no doubt, and now they're saying, "Hey, we're out of touch, we have a message problem." But they are going to have to deal with this issue of anger at--in government institutions. You and I spent a lot of time over the last two years talking about this anger that the public has and lost faith they have in institutions. That hasn't gone away. That's the, the issue here. That's certainly the message that the president believes he received on Tuesday, which is, look, people are still upset at institutions, and he's got to figure out how to become the leader of Washington and anti-Washington at the same time, which I think's going to be incredibly difficult to do. Ronald Reagan pulled it off because he still had a Democratic Congress...

MR. GREGORY: Mm-hmm.

MR. TODD: ...to run against in 1982 when he was in the exact same position that Barack Obama is now. What's odd for him is he's got to figure out how to run against his own Democratic Congress in some form or another and run against the institutions of Washington, and that's what's going to be a difficult challenge for him.

MR. GREGORY: But, Peggy, he's also dealing with a Republican Congress that was more difficult than he even accounted for in terms of not being willing to work with him. That's a reality.

MS. NOONAN: That's not how Republicans in Washington see it. They feel that their ideas say on health care, for instance, their ideas on tort reform, were simply flicked away and never really considered.

Let me say, on the communications thing, the president is often out there talking, his administration is every day. If you watch a lot of cable, it's what you see. It is the wallpaper of your life, seeing the administration putting its case forward. I think it's the wrong lesson to draw if you think we're not talking enough or we're not talking in the right, magical way. There is no right, magical way. The product that you're trying to sell may be faulty. Beyond that, part of communicating is listening. You talk and you hear. The administration has done a bad job the past year of hearing the response of the American people and their reservations over their biggest issue, which was health care.

MR. GREGORY: But aren't we over...

MS. KAY: Well...

MR. GREGORY: Go ahead, Katty.

MS. KAY: But one thing I would say is that it's hard to hear it because the message is very confused. On the one hand, people are saying "we want jobs, but we don't want the kind of spending that it's going to take to get those jobs. We want you to be tougher on terrorism, but we don't necessarily want a troop build-up in Afghanistan." So the message that we're getting from the country's confusing. I would say there is a risk of being a little bit apocalyptic here, that thinking we have had this one result and that changes the nature everything and we have to have this major reset, and that there is a tendency amongst, you know, journalists included, to be a little bit short-term about this. There are another 10 months to go until the midterm elections. This is only one year of a presidency, and there is ample time. A and maybe we should actually--and perhaps the White House needs to think this, too--step back a bit and think "let's not be too dramatic about this."

MR. GREGORY: Well, we've...

MR. DIONNE: Especially--journalists especially overate these things.

MR. GREGORY: Right.

MR. DIONNE: I agree with you on that. But you've got an unprecedented situation. We've never been in a situation where everything required 60 votes in the Senate. There was a headline in the Village Voice that said, "Republicans Claim 41-59 Senate Majority." That's what we have come to.

MR. DIONNE: And I think the fact that the healthcare bill stood around there like a bottle of milk out in the kitchen for two days made it look less and less appealing to people. And I think Democrats really face a choice here. If they walk away from this healthcare bill after voting for it in both houses, they will look very, very weak. They're going to be stuck with those votes anyway. I've been thinking of sailing metaphors, because of Ted Kennedy. If one election in one state can completely blow you off course, you're not much of a sailor.

MR. GREGORY: Well, there's no indication that they do plan to do that, right?

MR. TODD: No, not at all. And it does look like--I think, this, this, this idea of the House voting the Senate bill is still very much alive. When Nancy Pelosi said she didn't have the votes, that was a negotiating tactic. That was a--make the liberal Democrats in the House stare into the abyss of nothing and say, "OK, we could have nothing. How do you want to, how do you want to do that?" to, to get at your point.

But, you know, another, I think, struggle for this White House is the fact that nobody's seeing results. And obviously, so that's why I think, Katty, this is where the White House does sort of ascribe to this. Hey, patience, patience, patience. As soon as the public sees some results, then they have something to sell, because they certainly did pass a number of things, you know, and they think at some point when the economy starts turning and this and that.

But I think the other fundamental mistake they made on health care is that they viewed health care, they, they forgot that it is connected to the economy. And they would say, "Oh, yeah, we know that." And that anybody that's concerned about health care usually is not concerned about the care they're getting, they're concerned about their job and the fear of losing their job and therefore health care. And, and that's maybe where they had their priority flipped around.

MR. GREGORY: Let's talk a little bit about political conditions about the Republicans. But first, 1994 comes up a lot as a comparison, a wave that would sweep Democrats from power as they did when Bill Clinton was president. E.J. Dionne, back in 1994, in August, this is what you had to say on this program.

MR. DIONNE: Why did the Democrats get into this fix and why did Clinton get into this mess? I think that in 1992 it was very clear, and still is, that Americans are worried about a number of things. They're worried about losing their jobs, especially if they're blue collar or middle managers, even with the economic recovery. They don't think government works. The Clinton of '92 addressed all of those issues. And I think for the last year he has gotten lost in the details of health care, which chilled everybody's mind, and in Whitewater. And I think that what he's going to have to do and what the Democrats are going to have to do if they're going to get back on track is to reconnect with all of those themes. And I think that's what Clinton's going to spend the rest of the year doing.

(End videotape)

MR. GREGORY: Pretty striking. Could the--almost the same be said today?

MR. DIONNE: That guy looked so young. Who was that? God love him.

MR. GREGORY: Yeah, right, who was that?

MR. DIONNE: You could have embarrassed me. That was, that was pretty good. I do think that, in fact, that is precisely what needs to happen. Peggy mentioned there were no magic words, and I agree with that. This is not about magic. But if you go back to Ronald Reagan, the person that Peggy worked for so effectively, Ronald Reagan spent a lot of time not lost in the weeds of policy. He made large arguments, and he made large arguments against the other side. He spent a lot of time saying this old, failed liberalism doesn't work anymore. And I think what you need from Obama--in all of the speeches he's given, he has not made a consistent argument, provided a consistent narrative of where I want to move the nation. I think you're beginning to see that in the last few days. And Massachusetts, it's very strange to say, could turn out to be a blessing if it leads to a course correction 10 months before the midterms. The Democrats didn't see what was coming in '94; boy, they do now.

MR. GREGORY: Right. And, Peggy, it's interesting. Lou Cannon, who you know well, the Reagan biographer, wrote this week that, you know, the conventional wisdom that somehow this is the unraveling of the Obama presidency might be wrong. This could be--Reagan's first year, '82, was bad; landslide in '84. This is what he wrote, actually: "[Reagan's '84 re-election landslide] would not have happened without the economic recovery; no president is immune to prolonged economic downturn. But Reagan's performance in '82 was also crucial. ... Millions of Americans responded to Reagan's unflinching optimism and believed he would do the right thing. By that measure, if he can once again display the rousing audacity that marked the campaign for the presidency, Barack Obama can make a similar comeback."

MS. NOONAN: Let me tell you what I think is the difference between now and 1982. Yes, you have two young, new, compelling presidents, and they're going through a hard time in their first year. Here are the differences. One, Reagan was on the same page as his public with regard to what the great issues of the day were: the economy and national security, the Soviet Union. President Obama has not been the same page, he's been going down a different road. Two, Reagan in '82 had a clear plan that everybody knew. He said, "I'm going to cut your taxes and it's going to help get us out of it. I'm going to squeeze inflation out of the system." Because it was a clear plan, people gave it time. In the end, it seemed to work. Three, Reagan was a conservative president in a center-right country. That's not true with Mr. Obama, whose political philosophy is still, oddly, unclear in a way. It seems to--we see the impulses of it in his programs, but we're not sure what the basic thing is. But America remains a center-right country. So I don't buy the parallels of '82 and now.

MS. KAY: I would say that lack of clarity is very important, that there is a sense that people aren't confident about the leadership that they're getting from Washington. And if you remember one of the things in the '08 election that the Republicans and, to some extent, President Bush had been criticized for was a lack of competency. People wanted to feel that they had a, leadership that they could believe in, that was competent.

MS. KAY: And I think the struggles of the last week or two have begun to make people think, is this White House competent?

MS. NOONAN: Yes.

MS. KAY: Are they delivering on something that is clear? Are they actually managing to get the job done? Where do they go next? There's a sense of confusion, and I think that's very undermining for the president in terms of the electorate.

MS. NOONAN: Yes. I think that...

MR. GREGORY: There's also the issue of the sort of opposition that the president faces. Where is the Republican Party? We talked a little bit about that. Again, part of the conversation we've had outside the hour today in some outside interviews includes one with Dick Armey, a former congressman who's now part of FreedomWorks, who is part of this tea party movement that was influential in Massachusetts and elsewhere. Here's what he said about the center of American politics.

(Videotape)

FMR. REP. DICK ARMEY (R-TX): This is the broad center of American politics. Look at the polling data. Right now the tea party polls higher than the Republicans and the Democrats. And it is becoming increasingly clear to the electorate out there, and they're expressing their understanding, it is the Democrat majority in Congress and the president that's on the liberal fringe and we are on the center. There's no doubt about it.

(End videotape)

MR. TODD: Oh, well, I don't know if they're in the center. I mean, when we did our own polling on this, it's clear that the tea party gets a big benefit because there's one news organization that gives them a huge bump all the time. I mean, their favorable rating among Fox viewers is through the roof, and the rest of the country sort of doesn't know a lot about these folks. But the message of the tea party sort of saying "the government doesn't work, these institutions, and we've got to shrink the size of government," is tapping into what we were just discussing before...

MR. GREGORY: Mm-hmm.

MR. TODD: ...which is this, this--I would--not disgust, but it's sort of this distrust of all institutions that are out there, government included. But I think that--I want to go to something E.J. said about the Republican Party. I think the most striking thing about the minority party today vs.--that is that a Republican can't go home, and it's mostly because of this tea party crowd, cannot go home and sell a piece of pork that they got from Washington. It is now, when you bring home something, saying, "Hey, I brought federal dollars to this." You're on the defensive now.

MR. TODD: And so that does make the president's challenge. So it's not as if he can trade--you know, go and have these trades with a Susan Collins or Olympia Snowe, or let's say Lamar--let's go to--move over to maybe more conservative center-right, Lamar Alexander or something like this, because they're not getting a benefit at home of bringing something back.

MR. GREGORY: Right.

MR. TODD: Because we have, like, destroyed this, this, this idea that somehow anything from government that comes through is bad.

MR. GREGORY: Let me, let me get--E.J., just--I want to have you make your point. But also, as we tee up the State of the Union, another voice that we consulted on the outside was Governor of Pennsylvania Ed Rendell, former chair of the party, who offers this advice about tone and substance for the president going forward.

(Videotape)

GOV. ED RENDELL (D-PA): Mr. Obama was a very fine candidate. But most importantly, I think, our people, the, the Democratic base, the independents who supported us in the past, they want us to, to fight back, they want us to get something done. And look, if we're going to go down in the 2010 elections, and I don't think necessarily we are, but we ought to go down fighting for something we believe in, like health care for every American.

(End videotape)

MR. GREGORY: Will President Obama go down fighting?

MR. DIONNE: Well, he hopes he doesn't go down, but he will be fighting.

MR. GREGORY: But is that a new approach, the fighting part of it? Is that...

MR. DIONNE: The fighting is not a word you would associated in the last year with Barack Obama. And yet during the campaign, it's very similar to when he was fighting Mrs. Clinton in the primaries, where she was a more effective populist in those late primaries and he kind of had to learn it.

But I want to go back to something Chuck said. The--it's imperative, and this is part of the State of the Union, Democrats have to show government can work.

MR. GREGORY: Right.

MR. DIONNE: Because their whole argument is, "We can make the market work better, we can make the society better with careful uses of government." If people don't believe government can work, they're not going to turn to the Democrats.

On the tea party folks, what did Bob McDonnell, the new governor of Virginia, and Scott Brown have in common? They didn't have really divisive--they didn't have divisive primaries.

MR. GREGORY: Yeah.

MR. DIONNE: And so they could immediately run as real conservatives to the conservatives, but as problem-solving moderates to the rest of the electorate.

MR. GREGORY: And so, Peggy...

MR. DIONNE: If the tea party folks give Republicans a lot of primaries, they actually are going to set the party back.

MR. GREGORY: All right. But, but is Scott Brown then the hope, is he a symbol for the future of the Republican Party?

MS. NOONAN: Well, look, I think you got deep blue Virginia, you got Massachusetts--sorry, deep blue New Jersey, you got Virginia, a swing state, you got deep blue Massachusetts now, they all yielded up candidates who got the support of centrists, down-the-line Republicans, tea party folk. Whatever the tea party people say operationally on Election Day, they seem to be going for candidates who, who are Republican candidates who they believe on the issues of taxing and spending.

Can I throw in on the idea of institutions? Anybody governing now has a terrible problem, because faith in institutions, all institutions--journalism, government, the church...

MR. TODD: Sports. I mean...

MS. NOONAN: ...it's all way down. So, so anybody has that built-in problem in government. But I would throw out the idea that if you have that problem, you shouldn't be putting forward a 1,000 or 2,000-page healthcare bill in that environment.

And up next here, our MEET THE PRESS MINUTE. January 1976, another economic crisis and another president preparing to deliver his State of the Union address. We look back at the advice offered on this program from Democratic presidential candidate Lloyd Bentsen to Republican President Gerald Ford after this brief station break.

(Announcements)

MR. GREGORY: And we're back with our MEET THE PRESS MINUTE. January 1976, another time of economic turmoil in this country, as then President Gerald Ford prepares to give his State of the Union address to an anxious nation. Unemployment had climbed to 9 percent in the preceding year, and President Ford's approval rating fell below 50 percent. It was an election year, and in true MEET THE PRESS tradition, a steady stream of presidential candidates made appearances on the program. Here was one of them, Democratic Senator Lloyd Bentsen, offering advice to the Republican president he hoped to run against and defeat in the fall.

(Videotape, January 18, 1976)

MR. LAWRENCE E. SPIVAK: Senator Bentsen, if you were the president and had to deliver the State of the Union message, what would you list as your first domestic priority now?

SEN. BENTSEN: The first domestic priority is getting people back on payrolls, getting them off the unemployment roles, back where they're contributing to their families and contributing to doing away with this deficit that we're facing. You know, to have the head of the family home and the kids saying, "What's wrong with dad? Why isn't he working?"

What they're really trying to do in this economy of ours is to keep their foot on the brake of the economy, and I don't think we should be doing that. We should be creating opportunity. What people are really looking for in this country is a return of self-confidence. I believe I could make a contribution there and a very major one.

(End videotape)

MR. GREGORY: While Bentsen ultimately gained little traction in his presidential bid, the eventual Democratic nominee, a little-known Jimmy Carter, went on to narrowly win the White House later that year. As for Senator Bentsen, he went on to become the Democratic vice presidential nominee in 1988, and later served as President Bill Clinton's Treasury secretary. He died in 2006 at the age of 85.